Yikes. Jeremy Corbyn appears to be economically illiterate

During the aftermath of the 2008 financial crisis it was commonplace to encounter senior financiers and members of boards of major financial firms who would admit, privately, that there were substantial gaps in their knowledge of the complex products that had put a bomb under the West’s economy.

As a journalist in Britain it was my own ignorance about the architecture of the system that prompted me to spend several years researching and writing a book about what happened at the Royal Bank of Scotland. Briefly, RBS became, at the worst possible moment, the biggest bank in the world. Pre-crisis I had thought I had a fairly decent grasp of economic theory and how the financial sphere worked. In the aftermath of 2008 I discovered I didn’t know the half of it. I wasn’t alone.

Leading politicians had a steep learning curve too in the immediate crisis period. The banks they had put their faith in – as generators of growth and lovely tax receipts – had grown way too big, much too fast in manner that induced disaster. In the eurozone the crisis took longer to unfold, but the lesson was similar. Excessive scale, reckless lending and discombobulated complexity combined to blow up the economy.

But no matter what reasonable differences of opinion one might have with individual politicians – such as former Prime Minister Gordon Brown, who was in charge during the crisis here in Britain – about the size of the state or the model they used to rescue the financial system, it was clear that these were generally intelligent people with a grasp of the basics and a quite a bit more. Brown and his colleagues acted to save the market system and they understood how it functioned.

Watching Jeremy Corbyn be interviewed during the general election this week by Andrew Neil I had the horrible realisation that Labour’s candidate to be Prime Minister is not just misguided, or prone to mouthing far-left iconoclastic drivel. It’s worse than that. The man is economically illiterate.

The key passage in the interview came when Corbyn was under pressure from Neil on his plans to nationalise utilities. His breezy response demonstrated that he doesn’t understand what bonds are – debt.

Corbyn said: “First of all for nationalisation you don’t borrow. What you do is change share ownership for government bonds and it becomes an investment.”

Neil, temporarily taken aback, responded that this means creating more government debt. “No,” said Corbyn. “If you take over a company, say a water company, and you exchange those shares for government bonds, you then own the water company, the public as a whole, and it’d be run very differently. And the income from the water comes to… comes to the public purse.”

Neil tried again to introduce Corbyn to reality: “To acquire these companies you have to issue more debt.”

Bonds are debt. Bonds are a loan made to a government or company by investors.

Corbyn missed the point and ploughed on. He said that his bonds “attract an interest rate” and they “attract a benefit.” But they are not debt? They are magic government bonds?

Government debt is issued. It has to be paid back and needs to attract buyers, investors, who are influenced by all manner of factors, such as the trustworthiness of the sovereign and the brainpower and reliability or otherwise of those in charge of said state. Corbyn clearly has no sense of these debt dynamics.

His confusion is nationally shaming. Indeed, I cannot think of anyone in the modern history of this country who has ever stood for one of the two major parties seeking to be Prime Minister of Britain while being so woefully ill-equipped.

It is bad enough that the patriotic British Labour Party – once Atlanticist and a mainstream centre-left force – is now led by a Marxist. Worse, it is led by a Marxist who turns out to be economically illiterate.